One of Kazakhstan’s main focuses is currently promoting economic growth, and a large part of it relies on investment policies. Reforms to implement investment policies efficiently are underway. The Kazakhstan government divided investment policies into three parts; the regional, branch investment, and economic entities. Regional investment is focused on attracting foreign investors by promoting regional natural resources and others that could be interesting to the investors.
Branch investment makes sure that priorities are in line ranking economic sectors by relevance. Lately, innovation and technology appeared as one of the emerging markets.
Economic entities refer to production, manufacturing, and others whereby the main goal is to enhance productivity, new infrastructure and construction and updating the old one.
Investment Funds are becoming a growing trend in Kazakhstan, especially after the Law on Investment Funds from 1997 was updated and adjusted to a market economy in 2004. One of the first Funds that dates back to the 1990s in Kazakhstan was the JSC Mutual Fund - Bank of Kazakhstan Halyk, Capital, which failed since it ould not attract investment to keep going. There are many reasons for such a failure, and the first one was the legislation which was not adjusted to the situation and the emerging market. There was also the issue of double taxation and an inefficient promotion policy of the fund leaving investors unaware of the fund’s purpose.
The amended 1997 law brushed up the fund investment policies in order to attract not only foreign but also domestic investors to the stock market. Professional managers are supposed to take over investment funds to operate rising domestic savings. Investment fund promotion will also upgrade the stock and securities market as a whole.
There are three different types of investment funds under the Law of Kazakhstan and they are the real estate funds, mutual funds, and equity funds. Mutual funds refer to a collection of money held by different shareholders and run by fund managers. Equity fund invests in stocks, company shares, etc. Real estate fund represents investments in securities that are sold by public real estate companies, but do not exclude agricultural properties, apartments, etc.
Mutual funds in Kazakhstan have several different forms under Kazakhstani law. First comes the Open-end mutual fund which entitles shareholders to the right to demand buyout from the management company that runs it and they can do so at least biweekly. The second is the Interval mutual fund and it is the same as the open-end, with only a different timeframe. Namely, interval funds give the right to a buyout only once a year. Closed-end funds are different because they do not allow redeeming the shares. They also include a specified timeframe. The timeframe, i.e. period, and terms of the buyout are solely defined by the management company but they have to be in accordance with the mutual fund rules and regulation. The closed-end funds are usually related to fixed projects, whereby investors cannot sell the shares before the project’s completion.
After 2004, the mutual fund's activity was increasingly growing, but then came the crisis in 2008, and it contributed to a decline in mutual funds. People found it hard to trust financial institutions, funds, insurance companies all over the world. The crash on Wall Street affected everyone and everybody who has any economic role.
Kazakhstan has tried to restore trust in mutual funds, but we cannot precisely use the word "restore" since Kazakhstan pulled itself together very quickly after the crisis, and one might say, it handled it pretty well. It is rather an issue of raising awareness on investment funds than trust, given that Kazakhstan entered the investment fund waters only 10-15 years ago.
The country pushes forward investment funds by promoting fund management companies who have professional portfolio managers who will take care of their invested assets. Mutual fund shares come with tax benefits as well. Shareholders in mutual funds are exempted from income tax on their shares’ dividends, neither are taxes imposed on profits from buyouts. The government does not try to sugar-coat the situation; they also state that investment funds come with certain risks and that a fluctuating market can cause the shares to drop in value.
Still, mutual fund investment is quite popular in the majority of countries, and they are one of the key factors in the financial market. Fund managers can create a healthy investment environment which will attract the circulation of assets and increase the shares’ value.